REP.: Cetera Financial is now the face of RCAP’s independent retail advice segment. How do you keep Cetera’s culture from bleeding into all of the other b/ds that RCAP has acquired?

Larry Roth: The strategic framework is really designed to have all of the advantages of a scale organization, from our ability to invest in technology and wealth management capabilities, from our fee-based platforms to our consulting services to help advisors grow their businesses, to building quality compliance and supervision and overall risk management. Providing all of the benefits of, frankly, an enormous business, but doing so in a way that actually doesn’t dilute the culture.

I’ve mentioned combining our research group, combining our product diligence group, combining all of our technology budgets so we can do a really good job at building a highly efficient back office and middle office. It’s really about empowering the brands more than ever.

If you think of a consumer goods company like Procter & Gamble, people really do focus on the individual brand of the product that they buy and use, much more than they do on P&G. But P&G certainly does a lot for them. It was more about naming what we do in common.

REP.: RCAP has said it’s not offering retention deals, but did the company offer any to the advisors at firms purchased prior to Cetera?

LR: No, no they have not. The advisors are smart, successful entrepreneurs who have affiliated where they want to affiliate. And we are not in any way disrupting that. They don’t need to re-paper their files; they don’t need to contact their clients. Really, all they need to do is do what they do every day, which is run a great business.

Our retention rates are above 97 percent, recruiting is still strong and our organic growth has been great. And our view is that if we can give them everything they’ve had historically, plus do a better job with the tools and capabilities we have, they’ll be happy.

REP.: Without offering any retention deals, how did you achieve the 97 percent retention rate?

LR: As you would expect, we’re communicating every day with our management teams. We’ve reorganized, and Adam Antoniades, who is the CEO of First Allied, has taken on the role as president of Cetera Financial Group. As president, he’s working very closely with the presidents of all the firms—the Cetera firms, First Allied, and Summit, ICH and J.P. Turner, etc. And he will work closely with VSR and Girard.

The senior management of those firms are actively involved in setting our course, telling us what’s important to them and to their advisors and where they’d like help. One example of that is combining the research and diligence groups. They thought that would be a benefit to them so they could have quicker and more thorough product reviews.

REP.: Does RCS Capital have any plans to self-clear and self-custody?

LR: We have a relationship with Pershing, Fidelity, National Financial Services, as well as some other firms, and we self-clear through our bank business, Financial Institutions. Under the banner of wanting to help our advisors grow their businesses and also, very importantly, not disrupt their businesses, we will continue to have relationships with third-party clearing firms.

We think that forcing advisors to a self-clearing environment would be limiting. And at our size and at our scale, we’ll be able to capture the economic benefits we need while partnering with firms like Pershing and Fidelity.

REP.: Has RCS Capital faced any regulatory pushback over the pace and breadth of the recent acquisitions?

LR: We obviously keep them aware of what we are doing. Whenever a firm is sold, we are required to file in great detail how the change in ownership will affect the business. FINRA has been supportive of us because they understand that being part of a large NYSE-listed company like RCAP can really benefit firms, especially smaller ones who have great advisors and quality business but don’t have the access to capital the way we do.

REP.: Has there been any discussion with regulators regarding the infrastructure that needs to be set up around recordkeeping and data management?

LR: We’re very fortunate in that the Cetera executive management team was owned by a private equity firm considering taking the company public. They had already brought in some really fabulous executives. We have the senior team in terms of technology, operations and data management, all brought in over the last two to three years.

In the last month, we’ve hired someone who’s going to come in and help us design and build our data warehouses. The operations and data management areas are ones I’m very focused on because I think we can lower our risk profile and increase our efficiency at the same time.

REP.: RCAP is expecting to save $57-$65 billion from potential synergies after the integration, but where are these coming from?

LR: The synergies are, in most cases, coming from the relationships with our strategic partners, which will provide us significant revenue synergies. We also are working on reviewing and, in many cases, renegotiating with our product sponsors. In the future our growth, both revenue and profits, will be organic. It’s really a revenue play, to be quite honest and open about it.

We’re not going to focus on growing our profitability by reducing costs; we’re going to focus on profitability by growing the top line and doing so in a thoughtful way. So I think you’ll see our costs go down in a few areas in the operating of the business day-to-day, but you won’t see large reductions in force, for example.

REP.: What types of firms are you looking at now? Will there be many more small deals like the recent VSR and Girard buys, or will we see another bigger acquisition like Cetera or First Allied?

LR: I don’t really know what we’ll see in terms of acquisitions. We are really, truly focused on organic growth. That will be our engine. Other opportunities will be opportunistic. As things come our way, we will look at them. I think tuck-ins, at a certain point, make a lot of sense. I don’t expect anything gigantic, but who knows?

REP.: RCAP is about halfway to the reported 20,000-advisor mark in the next three to five years. Is that still your goal?

LR: No, those were not my words. I know where you read that, and I’ll leave it at that. The number was not mentioned specifically. We do intend to grow, but I can tell you we do not have a target of any particular number of advisors in our mind. We will keep the advisors we have, and we’ll help them grow.

LR: We have a consulting group at First Allied historically called First Allied University, which will be offered across the entire organization. They’ve helped advisors grow their practices much faster than anywhere I’ve seen in the industry. We’ve also mentioned two other things. One is our C2C, Connect to Clients, a tremendous portal that helps advisors drive their client communications and service in a dramatic way. We also mentioned something called Pentameter, a web-based tool to help advisors understand how well they run their business. We have about 20 items that are already built that were at First Allied or Cetera or a few other firms that will be available to all firms no later than January 2015.

Lastly, because of the aging demographic we’re all aware of, we’re working with our advisors who are interested in growing their businesses through acquisition to help them buy practices, within the Cetera family but also outside as well.

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